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Gold Price Forecast: XAU/USD downside appears difficult even as US NFP favors Fed hawks

  • Gold Price remains pressured towards short-term key support after snapping three-week downtrend with minor gains.
  • XAU/USD bears cheer upbeat United States Nonfarm Payrolls favoring Federal Reserve hawks but employment details aren’t too impressive.
  • US policymakers’ ability to avoid the ‘catastrophic’ default, absence of Fed talks ahead of FOCM may tease Gold buyers.
  • China inflation, second-tier data may entertain XAU/USD traders amid a likely less volatile week.

Gold Price (XAU/USD) bears the burden of fresh hawkish Federal Reserve (Fed) calls, especially after the strong United States Nonfarm Payrolls (NFP), as it slides below $1,950 amid early Monday morning in Asia. In doing so, the yellow metal holds onto the post-NFP losses despite posting the first weekly gain in four. That said, the pre-Fed blackout of policymakers may restrict the XAU/USD moves during the week while US ISM Services PMI and China inflation numbers may direct the Gold Price moves.

Gold Price lures buyers despite strong Nonfarm Payrolls

Gold Price marked the biggest daily slump in a month after the United States Nonfarm Payrolls (NFP) surprises markets with a strong number and bolstered the Federal Reserve (Fed). Even so, the XAU/USD snapped a three-week downtrend as market sentiment remains slightly positive. The reason could be linked to the mixed details of the US employment report for May.

On Friday, the US jobs report for May surprised markets with a jump in the headline Nonfarm Payrolls (NFP) by 339K versus 190K expected and 294K prior (revised). It’s worth noting, however, that the Unemployment Rate also rose to 3.7% from 3.4% prior, versus 3.5% market forecasts. It should be noted, that the Average Hourly Earnings eased whereas the Labor Force Participation Rate remain the same as previous.

It’s worth noting that the latest tension between the US and China, especially due to the Taiwan concerns, however, joins the likeliness of 25 basis points (bps) of the Federal Reserve (Fed) in June to exert downside pressure on the Gold Price.

United States policymakers’ ability to avoid default, no Fed talks can favor XAU/USD bulls

While the United States labor market report defends downside bias for the Gold Price, the policymakers’ ability to avoid the ‘catastrophic’ default keeps the metal buyers hopeful, especially amid the downside US Dollar and Treasury bond yields.

After the US House of Representatives and Senate passes the debt-ceiling bill, the key agreement reached US President Joe Biden’s desk for signing and became the law before the June 05 deadline, avoiding the ‘catastrophic’ default. It should be noted, however, that the global rating agencies remain cautious despite the price-positive move. “Fitch Ratings said on Friday the United States' "AAA" credit rating would remain on negative watch, despite the agreement that will allow the government to meet its obligations,” said Reuters.

Amid these plays, the United States Treasury bond yields and the US Dollar marked the first weekly loss in four while Wall Street closed on the positive side, which in turn keeps the riskier assets and the Gold Price on the buyer’s radar.

Looking forward, the Gold Price may witness hardships in extending the previous day’s losses as a lack of major data/events, as well as the cautious optimism in the market, may allow the XAU/USD to pare previous losses. That said, United States Factory Orders and ISM Services PMI may entertain the intraday Gold traders while China inflation and risk catalysts should be eyed afterward for clear directions.

Gold Price technical analysis

Gold Price has a bumpy road to travel towards the south despite reversing from a 12-day-old horizontal resistance, around $1,985-87.

The reason could be linked to the below 50.0 levels of the Relative Strength Index (RSI) line, placed at 14, as well as an 11-week horizontal support zone near $1,937-32 that also comprises the previous resistance line stretched from early May.

Even if the XAU/USD breaks the aforementioned horizontal support zone, the 61.8% Fibonacci retracement level of its March-May upside, near $1,913, will precede the $1,900 round figure and the mid-March swing low of around $1,884 to challenge the Gold bears.

On the contrary, the Gold Price upside beyond the aforementioned horizontal resistance area surrounding $1,985-87 isn’t an open invitation to the buyers as the 200-bar SMA level of around $1,990 and the $2,000 psychological magnet can restrict the bullion’s north-run.

In a case where the XAU/USD remains firmer past $2,000, multiple hurdles near $,2010 and $2,050 can act as the last defenses of the bears.

Overall, Gold prices appear to have limited downside room and can lure the short-term recovery.

Gold Price: Four-hour chart

Trend: Limited downside expected

additional important levels

Overview
Today last price1949.92
Today Daily Change1.90
Today Daily Change %0.10%
Today daily open1948.02
 
Trends
Daily SMA201980.91
Daily SMA501991.4
Daily SMA1001939.1
Daily SMA2001835.68
 
Levels
Previous Daily High1983.5
Previous Daily Low1947.56
Previous Weekly High1983.5
Previous Weekly Low1932.12
Previous Monthly High2079.76
Previous Monthly Low1932.12
Daily Fibonacci 38.2%1961.29
Daily Fibonacci 61.8%1969.77
Daily Pivot Point S11935.89
Daily Pivot Point S21923.75
Daily Pivot Point S31899.95
Daily Pivot Point R11971.83
Daily Pivot Point R21995.63
Daily Pivot Point R32007.77

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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Gold Price Forecast: XAU/USD downside appears difficult even as US NFP favors Fed hawks